Chapter 5
Industry representative organisations
5.1
This chapter considers grape and wine industry representation at
regional, state and national level, including the code of conduct that operates
between winemakers and winegrape growers.
5.2
Wine Federation of Australia (WFA) and Wine Grape Growers Australia (WGGA)
are the two national organisations currently declared under the Australian Grape
and Wine Authority Act 2013, representing winemakers and growers
respectively.[1]
The Act requires that at least one representative organisation be declared from
the two industries. Representative organisations are funded largely through the
collection of voluntary membership levies and project funding.[2]
5.3
WFA submitted that it has more than 370 winemaker members of the total
of approximately 2 500 in Australia,[3]
representing approximately 80 per cent of the national crush. Small, medium and
large winemakers are represented through membership committees with an equal
voice on the WFA Board, with an 80 per cent majority required for Board
decisions in order to maximise consensus.[4]
5.4
Representing Australian winegrape growers, WGGA provided an estimate
that 3 700 of the total 6 200 growers have 'direct involvement in the
organisation.'[5]
Its executive committee is comprised of a non-voting executive director and
independent chair, and eight voting members with representation across the
Australian states and the Riverland, Riverina and Murray Valley regions.[6]
5.5
Beneath WFA and WGGA, various state and regional representative
organisations operate independently based on voluntary contributions from their
winemaker and grower members.[7]
An illustration of the layered approach to industry representation is at figure
1, representing South Australia.[8]
Larger winemakers can be members of several organisations across states and
regions.[9]
5.6
Some submitters commented that the number of industry representation
bodies leads to confusion and waste.[10]
Wine Tasmania submitted that the two national bodies 'have extremely limited
resources and are struggling to galvanise the industry and be relevant across
all segments.'[11]
Accolade Wines expressed concern that while 'the industry organisations
generally function well':
...the multitude of representational levels is not an effective
use of industry resources... We strongly support WFA and the state and regional
organisations, but encourage them to avoid duplication of effort.[12]
5.7
The committee heard only limited evidence of a lack of support for the
work of individual representative organisations. Riverland Wine submitted that
the efficacy of WGGA was challenged by a lack of resources:
WGGA currently does not have enough human or financial
resource to effectively cope with the challenges and tasks that confront the
organisation and wine grape growers nationally. This is despite the application
and ability of the Executive Officer. There is no point in an organisation
merely existing; if it is unable to achieve core goals then it has no reason to
exist.[13]
5.8
Further, the South Australian Government submitted that because WGGA is
primarily funded by South Australian growers, 'mechanisms are needed' to
increase its representation of growers in other jurisdictions.[14]
5.9
Mr Warren Randall from Seppelstfield Wine told the committee that 'WFA
is not supported by the majority of Australian winemakers.'[15]
WineFoodTechMedia Group reported that WFA membership is 'skewed towards those
producing higher volumes', but noted that 'smaller producers have
representation via their State bodies' or through the small producers
subcommittee.[16]
5.10
The committee heard evidence that witnesses and submitters are actively
considering ways to streamline industry representation. South Australian Wine
Industry Association submitted that work 'is underway at state and national
levels' towards a 'more integrated industry representation model'.[17]
WFA President Mr Tony D'Aloisio AM told the committee that in the longer term,
WFA and WGGA could merge, stating that 'just as we have one statutory body, we
should have one industry body – but that is quite a way off'.[18]
Code of Conduct
5.11
Collaboration between the national representative organisations
culminated in the commencement of the Australian Wine Industry Code of Conduct
(the Code) in January 2009.
5.12
The Code is voluntary and 'opt-in' for winegrape purchasers, who are
then bound by its provisions in their dealings with growers.[19]
Signatories agree to adhere to minimum standards in those dealings, including
on contract, pricing methods and notification, payment terms and dispute resolution
procedures.[20]
5.13
Governance of the Code has changed significantly since 2009. At
commencement, the Code was administered by an independent committee of three, and
subsequently four, appointed part-time members with commercial experience.[21]
In 2011, the tenure of appointed members was not renewed because of 'costs
associated with the Code considering the low uptake and low number of
disputes'.[22]
The Code Management Committee, on which WFA and WGGA have equal representation,
assumed responsibility for its operation.[23]
5.14
Reviews of the Code were to be conducted at intervals of not less than
three years, a requirement that does not appear to have been strictly observed.
An independent review by Mr Neill Buck reported in 2010 with recommendations
on coverage targets, simplification and administration of the Code.[24]
An internal review was reported as having concluded in December 2014, resulting
in an amendment providing additional time to resolve disputes under the Code.[25]
5.15
Responsibility for promoting the Code is share by signatories and
representative bodies. WFA explained the promotional role they share with WGGA:
The two representative bodies, WFA and WGGA, have agreed to
publicize and promote the Code and its dispute resolution procedures, and to
work to maximize its adoption within the industry.[26]
5.16
While figures are not available in all reports, the 2012–13 annual
report of the Code Management Committee recorded an expense of $42.19 by WFA on
promotion of the Code.[27]
Low uptake
5.17
Many submitters and witnesses expressed concern about low uptake of the
voluntary Code.[28]
Of the approximately 2 500 wine producers in Australia only 41 are signatories,
and only around 40 per cent of wine production is covered.[29]
In 2014–15 there was only one new signatory.
Signatories to
Australian Wine Industry Code of Conduct
|
Financial year
|
Number of signatories
|
% Total crush
|
|
2008-09
|
3
|
25%
|
|
2009-10
|
6
|
37%
|
|
2010-11
|
7
|
31%
|
|
2011-12
|
8
|
31%
|
|
2012-13
|
33
|
37%
|
|
2013-14
|
40
|
40%
|
|
2014-15
|
41
|
40%
|
Source: Australian Wine Industry Code of Conduct annual reports 2009 to
2014–15.[30]
5.18
The committee heard that performance targets set for the number of
signatories to the Code by 31 December 2012 and 31 December 2013 were not met,
and have not been updated in the Code itself. By 2012, the Code was to sign a
quarter of the top 100 wine producers by tonnes processed and half by 2013. The
committee notes that annual reports produced by the Code Management Committee
do not directly report against these targets, quoting a percentage of the total
crush rather than a percentage of the top producers.
5.19
The committee heard evidence that low uptake is leading to inconsistency
and unfairness in transactions between winemakers and growers.[31]
The Riverina Wine Marketing Board submitted that the Code has had little effect
in the region, where transactions frequently contradict its terms.[32]
Murray Valley Winegrowers described a commercial advantage that has emerged for
those who do not sign, stating:
Not only does this failing expose growers to unethical and
unregulated treatment, it imposes certain standards on signatories that
nonsignatories are able to ignore. For example, the requirement on signatories
to publicise indicative prices leaves others able to “piggyback” on those, and
to experiment with their own brand of dispute resolution.[33]
5.20
Further examples of inconsistency with the Code include agreements that
are not in writing or are 'vague on trading terms,' that lack dispute
resolution mechanisms and contain payment terms that can 'extend over eight
months.'[34]
Riverland Wine submitted that the Code had fostered an unhelpful practice
whereby stipulating the latest date for price notification in the Code had
created a 'default announcement date', providing less notice to growers than
previously.[35]
5.21
Explanations for low uptake of the Code varied between sectors and
regions. Wine Tasmania told the committee that there would be 'minimal' take-up
of the Code in Tasmania because it is a 'sellers' market' where 'quite a lot of
people are happy to pay what they need to pay.[36]
Differently, key proponent WGGA described the lack of signatories to the Code
as 'symptomatic of the lack of trust in the wine sector.'[37]
WFA submitted that 'continued promotion of the code and its benefits to the
sector' would improve its uptake, committing to 'increase this substantially in
2016.'[38]
Considering a mandatory code
5.22
Development of the Code followed a 2005 recommendation of this committee
to make a mandatory code of conduct prescribed under the then Trade
Practices Act 1974 (now Competition and Consumer Act 2010). The
committee reasoned:
...it is unlikely that a voluntary code would be enough to
protect growers with weak bargaining power. The more ethical winemakers would
presumably follow the code; the less ethical would not. Given the strong
evidence of poor business relations and exploitation of growers by some
winemakers, the committee thinks that a mandatory code is justified.[39]
5.23
Responding in 2006, Government did not support the recommendation,
instead supporting efforts of WFA and WGGA to develop a voluntary code.[40]
5.24
The committee heard renewed support for a mandatory code from some
submitters and witnesses to this inquiry.[41]
Mr Brian Simpson of the Riverina Wine Grape Marketing Board told the committee
that a mandatory code would 'remedy the situation in which 'growers deliver
fruit without even knowing what price they are going to get.'[42]
Significantly, WGGA told the committee that:
Our constituents are saying clearly that they want a
mandatory code. Mandatory codes have the positive that everyone is in them, but
of course the downside is inflexibility and more basic terms.[43]
5.25
In place of a standalone wine industry code, some submitters and
witnesses including WGGA proposed the mandatory Horticulture Code of Conduct
be amended to cover winegrape sales.[44]
Arguing to the contrary, WFA submitted that applying the horticultural
equivalent would have unintended consequences for the wine industry.[45]
5.26
More submitters and witnesses argued for the voluntary code to be
maintained, provided it is more broadly adopted.[46]
Accolade Wines submitted that:
We strongly hold that a voluntary code, regularly reviewed
and agreed by winemaker and grapegrower organisations and broadly adopted by
industry is the most effective mechanism to ensure good conduct within the
industry.[47]
5.27
The Australian Small Business Commissioner submitted that 'if the whole industry
abided by the Code, there would be significant improvements in relationships
between growers and purchasers.'[48]
5.28
Consistent with views heard by this committee, and in particular the
different positions taken by WFA and WGGA, the Australian Small Business
Commissioner reported 'no consensus' on a mandatory code. After convening an
industry roundtable in March 2015, the Commissioner noted there were 'significant
issues to resolve' among participants. Their submission recognised a mandatory
code as 'an appropriate action' only in the absence of increased support for
the Code.[49]
5.29
The committee heard that there is some scope for amendment of the
existing, voluntary Code to improve its operation and uptake. Based on roundtable
outcomes, the Australian Small Business Commissioner called for review of the
Code and the 'indicative pricing provisions' which are considered too
prescriptive by some producers.[50]
These recommendations were supported by Treasury Wine Estates.[51]
Committee view
5.30
At this stage, the committee is persuaded of the value of a voluntary
and industry‑owned code of conduct. The committee does not consider that
the Code has yet achieved its potential as a fair dealing framework that is truly
responsive to industry. This is illustrated by evidence that inconsistent
application of the Code can lead to perverse outcomes for growers. The
committee is disappointed with the low levels of uptake of the Code and the perceived
lack of cooperation between the two national representative organisations.
5.31
The committee noted with concern the move away from an independent
administration committee and the recent delay in meeting the requirement that
the Code be reviewed triennially by 30 June of the relevant year.
5.32
The committee encourages careful review of the Code and renewed
commitment to boosting its industry coverage. If newly agreed targets are not
met after two years, the committee considers that a mandatory code should be
reconsidered by Government.
Recommendation 11
5.33
The committee recommends an independent review of the Australian
Wine Industry Code of Conduct, to report to Government
before 30 June 2016.
Recommendation 12
5.34
The committee recommends that if targets for increase uptake of
the Australian Wine Industry Code of Conduct are not met, the Government, in
consultation with representative organisations for growers and winemakers,
reconsider the development of a mandatory code before the end of 2017.
Senator Glenn Sterle
Chair
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